FIVE QUESTIONS for JOHN ROTHER; Assessing New Rules for Managed Care

By MILT FREUDENHEIM

Published: November 26, 2000

WEIGHING in on a controversy that has been stuck in Congressional gridlock for years, President Clinton issued new rules last week that promise quicker decisions for patients in disputes with managed-care companies and the right to appeal when insurance claims are denied.

The regulations, issued by the Labor Department after four years of pressure from consumer groups and resistance from insurers and employers, will apply to 130 million Americans, about half the population. The rest are covered by similar rules under Medicare and other government programs.

The new rules, which take effect in 2002, include the right to a review inside the health plan by appropriately trained professionals, disclosure of rules and judgments on denials, and time limits for resolving disputes.

Some big health insurers already offer an appeal to outside arbitration. Many states require a right to external review, but state patient protection laws generally do not govern self-insured health plans, which provide coverage for most employees of all but the smallest companies. The new rules do not address the issue of external review.

Insurance industry spokesmen and business critics called the rules potentially expensive and disruptive. ''The new regulations allow claimants to go to court if the plan does not strictly adhere to the regulation's timetables -- potentially a gold mine for new lawsuits,'' said Neil Trautwein, director of employment policy at the National Association of Manufacturers.

Charles N. Kahn III, president of the Health Insurance Association of America, said some employers would drop coverage because the rules would raise costs. Karen M. Ignagni, president of the American Association of Health Plans, a managed-care group, said the rules could put patients ''on a fast track to court.''

John Rother, director of legislative and public policy for AARP, the former American Association of Retired Persons, said the rules would benefit consumers and be no big problem for insurers because ''most well-run health plans'' already comply. Following are excerpts from a conversation with him last week. MILT FREUDENHEIM

Q. What difference will the rules make to the public?

A. They will be a major step forward toward fairness for most consumers. They establish reasonable time limits for resolving disputes. They establish expedited internal appeals inside the plan for resolving complaints. They require an appropriately trained professional to review any disputes. We will no longer have a bureaucrat or a clerk doing this, although ''appropriately trained'' leaves a little room for abuses. And the rules provide, for the first time, for disclosure so a patient can actually get some information about who is making these decisions and on what basis.

Q. Might these rules be overturned by Congress or the new president?

A. It depends on which administration is elected. These rules have been a result of almost four years of effort. They don't go into effect until Jan. 1, 2002. But our hope is that because they have been so thoroughly vetted, that Congress will let them go forward, and then we will see if there is any unanticipated problem. They are final rules. It would be very unusual for a secretary of labor to reopen final rules. As a practical matter, it would be up to Congress.

Q. Do these rules help or hinder the chances that a new Congress will enact a patients' rights law that may include a right to sue health plans?

A. I don't think this is going to have a great impact on future consideration by Congress. These rules only provide for internal review inside health plans. They do not and cannot address external review such as lawsuits. Therefore, Congress still needs to resolve this issue. The elections resulted in an increase in the support for a stronger protection law, especially in the Senate, which has blocked the Norwood-Dingell legislation that the House passed last year, which included a right to sue health plans.

Q. Industry spokesmen say the new rules will add to legal and other expenses of health plans and could lead to higher premiums and more people joining the 40 million without coverage. What do you think?

A. The plans are already subject to similar requirements under Medicare and the accreditation requirements of the National Committee for Quality Assurance [an industry accrediting group]. Additional compliance costs are likely to be minimal and to occur only in plans that are not already accredited by N.C.Q.A.

Q. Some Wall Street analysts say the costs of complying will overwhelm smaller health plans, which are already financially strained. Isn't that bad for consumers?

A. Health plans that are well run today already meet most of these requirements. If a health plan were unable to meet these standards, they would not be, in all probability, in a good position to serve consumers very well.